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Devastating storms in Billings area have increased number of insurance claims, and rates

Billings Gazette (MT)

Aug. 05--This summer, hailstorms have been a small blip on the insurance radar compared to much more devastating storms in the past four years. Experts in the industry say this is a great time for homeowners to scrutinize their policies.

And, that starts with deductibles.

During the past four years insurance companies have changed how they calculate deductibles, and the shift can be jarring for homeowners if they haven't been paying close attention.

"The 2014 and 2016 storms were major events," said John Bidlake of Bidlake Insurance in Billings.

The amount of damage the storms caused and the economic impact of the thousands of claims filed by homeowners forced insurance companies to change how they approach the business.

The 2014 hailstorm was the first big hit this decade, with wind speeds that topped 59 mph across the Billings area. Reports of hail ranging from the size of golf balls to baseballs poured in to the Billings National Weather Service office.

The last time Billings received hail the size of baseballs was during the Father's Day storm on June 20, 2010.

After the 2014 storm, roughly 3,000 Billings residents had their home insurance policies canceled. It was a big enough number that then-Montana Insurance Commissioner Monica Lindeen investigated and proposed legislation to limit the practice.

The 2016 storm struck in late May with wind gusts up to 66 mph and pounded parts of Billings with hail the size of gumballs, damaging thousands of homes, cars and personal property.

After the 2014 storm, a few insurance companies experimented with implementing a percentage-based deductible for wind and hail damage -- something companies started back east following a series of catastrophic hurricanes in the early 2010s. The practice was relatively unknown in the Rocky Mountain West, Bidlake said.

Percentage-based deductibles require homeowners to pay out of pocket for repairs that equal a percentage of the coverage they have on their home, Bidlake said. Usually it's between 1 and 2 percent.

For example, if a homeowner has $150,000 of coverage on their home with a percentage-based deductible of 1 percent, the out-of-pocket expense for the homeowner would be $1,500. In the past, deductibles tended to be a flat amount, like $1,000.

The rub comes when the homeowner's coverage changes. Each year, most insurance companies will increase the coverage on a policy, based on inflation. If a homeowner has been moved to a percentage-based deductible, that yearly increase in coverage means the deductible rises each year as well.

The practice became widespread in Billings after the 2016 storm.

"The 2016 storm was such a major storm, carriers decided they had to look at it," Bidlake said.

As a result, when homeowners make a claim after a storm like the one that hit parts of Billings two weeks ago, they can be surprised that their deductible is much higher than they thought.

"The client needs to be aware," Bidlake said. "They don't always know what their deductible is doing. It's really important for homeowners to contact their agents and find out."

Rhonda Kelim, one of the owners of Jackson & Iverson Insurance in Billings, noted that one of the big side effects of the 2014 and 2016 hail storms was that some national insurance companies pulled out of the area.

The amount of damage done and the number of claims filed made it hard on these companies to operate at a profit, Kelim said.

"Billings doesn't have the population to absorb these huge losses," she said.

As a result, the departure of some insurance companies drives up the rates offered by those left operating here.

Patti Dundas, president of the Billings Association of Realtors, has seen home insurance rates increase dramatically over the last four years. For her, it's important that homeowners to understand what their deductibles are and when it's necessary to file a claim.

Insurance claims follow the homeowner; they don't stay with the house, she said. And too many claims can result in the insurance company dropping the homeowner, which was what happened after the 2014 storms.

"You don't always need to rush out and file a claim," Dundas said.

If there's major damage, that's different, she said. But if a homeowner sees some shingles that seem out of place or a few pock marks in the siding, get an expert opinion before taking action, she said.

Bidlake agreed.

"It's a good idea to contact a contractor," he said.

Asking an insurance adjuster to take a look first is also a good idea, he said.

Having a professional look over the property first can give the homeowner an idea of how bad the damage is and how much it will cost to fix it. If the total comes in under the homeowner's deductible, it's probably worth it not to file a claim.

That's one more reason for homeowners to be aware how much their deductibles are, Bidlake said.

Big storms often attract out-of-state contractors, another area in which homeowners should exercise caution, Dundas said.

"Be careful who you give your business to," she said.

It's easier to check on reputations, work history and compliance with state contractor requirements if the company is local. It's also easier to work through a dispute or a complaint with a company if they're based locally.